EX-99.1 2 dex991.htm PRESS RELEASE OF HUDSON HIGHLAND GROUP, INC. ISSUED ON FEBRUARY 16, 2006 Press Release of Hudson Highland Group, Inc. issued on February 16, 2006

Exhibit 99.1

 

LOGO

 

For Immediate Release    Contacts:    David F. Kirby
          Hudson Highland Group
          212-351-7216
          david.kirby@hhgroup.com
          Thomas Smith
          Ogilvy Public Relations Worldwide
          212-880-5269
          thomas.smith@ogilvypr.com

 

Hudson Highland Group Reports

2005 Fourth Quarter and Full-Year Financial Results

 

NEW YORK, NY – February 16, 2006 – Hudson Highland Group, Inc. (NASDAQ: HHGP), one of the world’s leading providers of specialized professional staffing, retained executive search and human capital solutions, today announced financial results for the fourth quarter and full year ended December 31, 2005.

 

2005 Fourth Quarter Summary

 

  •   Revenue of $354.0 million, an increase of 2.9 percent from $344.1 million for the fourth quarter of 2004

 

  •   Gross margin of $132.4 million, or 37.4 percent of revenue, up 2.7 percent from $128.9 million, or 37.5 percent of revenue, for the same year ago period

 

  •   EBITDA of $7.1 million, or 2.0 percent of revenue, an increase of 44.7 percent compared with $4.9 million, or 1.4 percent of revenue, for the fourth quarter of 2004

 

  •   Net income of $2.8 million, or $0.12 per basic and $0.11 per diluted share, compared with a net loss of $1.3 million, or $0.07 per basic and diluted share for the fourth quarter of 2004

 

2005 Full-Year Summary

 

  •   Revenue of $1.428 billion, an increase of 13.7 percent from $1.256 billion for 2004

 

  •   Gross margin of $536.9 million, or 37.6 percent of revenue, up 14.2 percent from $470.2 million, or 37.4 percent of revenue, for 2004

 

  •   EBITDA of $29.6 million, or 2.1 percent of revenue, compared with a loss of $3.1 million for 2004

 

  •   Net income of $5.3 million, or $0.24 per basic and $0.22 per diluted share, compared to a net loss of $26.8 million, or $1.38 per basic and diluted share for 2004

“Hudson Highland Group made solid progress during 2005 toward strategic business segment growth and improved profitability, despite some hiring demand softness that surfaced during the fourth quarter in the Australia/New Zealand market,” said Jon Chait, chairman and chief executive officer of Hudson Highland Group. “We remain confident about our overall prospects and firmly committed to our long-term goal of sustainable EBITDA margins in the 7 to 10 percent range.”

 

Mary Jane Raymond, executive vice president and chief financial officer of Hudson Highland Group commented, “For 2006, the company will maintain its focus on continuing to shift its business portfolio to high-value, high-margin segments and achieving further profitability improvement.”

 

Guidance

 

Given the current economic environment, the company expects 2006 EBITDA as a percentage of revenue to be 2.5 to 3.5 percent, constant currency revenue growth of 1 to 5 percent and constant currency gross margin growth of 5 to 10 percent. This guidance is based on expectations of constant currency revenue growth of 7 to 12 percent for Hudson North America, 0 to 5 percent for Hudson Europe and Highland Partners, and -5 to 5 percent in Hudson Asia Pacific. This guidance does not reflect the impact of any acquisitions or divestitures that the company may consider in the future.

 

For the first quarter of 2006, historically the smallest profit generating quarter of the year, the company expects lower revenue and EBITDA than the prior year period due to business conditions in the Asia Pacific region.

 

Beginning in the first quarter of 2006, the company will record compensation expense related to outstanding employee stock options in accordance with FAS 123R. Based on current information, the company anticipates the impact of this to be $4.9 million for the full year 2006. Corresponding costs in 2005 would have been $4.5 million.

 

Conference Call / Webcast

 

Hudson Highland Group will conduct a conference call Friday, February 17, 2006 at 9:00 AM ET to discuss this announcement. Investors wishing to participate can join the conference call by dialing 1-800-374-1532 followed by the participant passcode 3355299 at 8:50 AM ET. For those outside the United States, please call in on 1-706-634-5594 followed by the participant passcode 3355299. Hudson Highland Group’s quarterly conference call can also be accessed online through Yahoo! Finance at www.yahoo.com and the investor information section of the company’s website at www.hhgroup.com.

 

Additional Information

 

Please find additional information about the company’s quarterly results in our shareholder letter in the investor information section of the company’s website at www.hhgroup.com.

Hudson Highland Group

 

Hudson Highland Group is one of the world’s leading professional staffing, retained executive search and human capital solution providers. We help our clients achieve greater organizational performance by assessing, recruiting and developing the best and brightest people for their businesses. Our approximately 3,800 employees in more than 20 countries are dedicated to providing unparalleled service and value to our clients. More information about Hudson Highland Group is available at www.hhgroup.com.

 

Safe Harbor Statement

 

This press release contains statements that the company believes to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this press release, including those under the caption “Guidance” and other statements regarding the company’s future financial condition, results of operations, business operations and business prospects, are forward-looking statements. Words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “predict,” “believe” and similar words, expressions and variations of these words and expressions are intended to identify forward-looking statements. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These factors include, but are not limited to, the impact of global economic fluctuations on temporary contracting operations; the cyclical nature of the company’s executive search and mid-market professional staffing businesses; the company’s ability to manage its growth; risks associated with expansion; risks and financial impact associated with disposition of non-strategic assets; the company’s reliance on information systems and technology; competition; fluctuations in operating results; risks relating to foreign operations, including foreign currency fluctuations; dependence on highly skilled professionals and key management personnel; the impact of employees departing with existing executive search clients; risks maintaining professional reputation and brand name; restrictions imposed by blocking arrangements; exposure to employment-related claims, and limits on insurance coverage related thereto; government regulations; and restrictions on the company’s operating flexibility due to the terms of its credit facility. Additional information concerning these and other factors is contained in the company’s filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this press release. The company assumes no obligation, and expressly disclaims any obligation, to review or confirm analysts’ expectations or estimates or to update any forward-looking statements, whether as a result of new information, future events or otherwise.

 

###

 

Financial Tables Follow, Presented in Refined Segment Information Format

HUDSON HIGHLAND GROUP, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

(unaudited)

 

     Three Months Ended
December 31,
    

Year Ended

December 31,

  
     2005
     2004
     2005
     2004
  

Revenue

    $ 353,969     $ 344,090     $ 1,428,276     $ 1,256,354  

Direct costs

      221,580       215,164       891,345       786,134  
    
 
 
 

Gross margin

      132,389       128,926       536,931       470,220  

Operating expenses:

                                 

Selling, general and administrative

      125,210       123,003       507,184       469,214  

Depreciation and amortization

      4,711       5,746       18,412       20,108  

Business reorganization expenses (recoveries)

      90       (89 )     233       3,361  

Merger and integration (recoveries) expenses

      (35 )     1,090       (70 )     736  
    
 
 
 

Total operating expenses

      129,976       129,750       525,759       493,419  

Operating income (loss)

      2,413       (824 )     11,172       (23,199 )

Other income (expense):

                                 

Interest, net

      (600 )     (51 )     (1,852 )     (104 )

Other, net

      654       (75 )     1,029       (1,834 )
    
 
 
 

Income (loss) before provision for (benefit) for income taxes

      2,467       (950 )     10,349       (25,137 )

Provision (benefit) for income taxes

      (323 )     387       5,036       1,638  
    
 
 
 

Net income (loss)

    $ 2,790     $ (1,337 )   $ 5,313     $ (26,775 )
    
 
 
 

Income (loss) per share:

                                 

Basic income (loss)

    $ .12     $ (0.07 )   $ .24     $ (1.38 )

Diluted income (loss)

    $ .11     $ (0.07 )   $ .22     $ (1.38 )

Weighted average shares outstanding:

                                 

Basic

      24,103,000       20,371,000       22,295,000       19,457,000  

Diluted

      25,823,000       20,371,000       23,674,000       19,457,000  

HUDSON HIGHLAND GROUP, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands, except share and per share amounts)

 

    

December 31,

2005

    

December 31,

2004

  
     (unaudited)        
ASSETS                 

Current assets:

                 

Cash and cash equivalents

    $ 34,108     $ 21,064  

Accounts receivable, net

      232,081       197,582  

Other current assets

      14,330       14,187  
    
 

Total current assets

      280,519       232,833  

Property and equipment, net

      31,438       36,360  

Intangibles, net

      31,100       6,104  

Other assets

      5,359       6,081  
    
 

Total assets

    $ 348,416     $ 281,378  
    
 
LIABILITIES AND STOCKHOLDERS’ EQUITY                 

Current liabilities:

                 

Accounts payable

    $ 24,718     $ 27,023  

Accrued expenses and other current liabilities

      140,036       140,903  

Short-term borrowings and current portion of long-term debt

      32,544       4,066  

Accrued business reorganization expenses

      4,223       8,930  

Accrued merger and integration expenses

      1,239       1,872  
    
 

Total current liabilities

      202,760       182,794  

Accrued business reorganization expenses, non-current

      4,095       6,832  

Accrued merger and integration expenses, non-current

      2,038       3,329  

Other non-current liabilities

      5,948       2,648  

Long-term debt, less current portion

      478       2,041  
    
 

Total liabilities

      215,319       197,644  
    
 

Commitments and contingencies

                 

Stockholders’ equity:

                 

Preferred stock, $0.001 par value, 10,000,000 shares authorized; none issued or outstanding

      —         —    

Common stock, $0.001 par value, 100,000,000 shares authorized; issued: 24,341,907 and 20,612,966 shares, respectively

      24       21  

Additional paid-in capital

      404,755       353,825  

Accumulated deficit

      (306,263 )     (311,576 )

Accumulated other comprehensive income - translation adjustments

      34,811       41,694  

Treasury stock, 15,798 shares

      (230 )     (230 )
    
 

Total stockholders’ equity

      133,097       83,734  
    
 
     $ 348,416     $ 281,378  
    
 

HUDSON HIGHLAND GROUP, INC.

SEGMENT ANALYSIS

(in thousands)

(unaudited)

 

For the Three Months Ended

December 31, 2005

   

Hudson

Americas (2)

    

Hudson

Europe

    

Hudson

Asia Pacific

     Highland
Partners
     Corporate
     Total
  

Revenue

    $ 117,472     $ 117,282     $ 102,641     $ 16,574     $ —       $ 353,969  
    
 
 
 
 
 

Gross margin

    $ 30,262     $ 49,917     $ 36,288     $ 15,922     $ —       $ 132,389  
    
 
 
 
 
 

Adjusted EBITDA (1)

    $ 4,768     $ 3,597     $ 4,905     $ 1,740     $ (7,831 )   $ 7,179  

Business reorganization expenses

      1       37       43       9       —         90  

Merger and integration (recoveries)

      —         —         (35 )     —         —         (35 )
    
 
 
 
 
 

EBITDA (1)

      4,767       3,560       4,897       1,731       (7,831 )     7,124  

Depreciation and amortization

      1,471       1,828       926       331       155       4,711  
    
 
 
 
 
 

Operating income (loss)

    $ 3,296     $ 1,732     $ 3,971     $ 1,400     $ (7,986 )   $ 2,413  
    
 
 
 
 
 

For the Three Months Ended

December 31, 2004

   

Hudson

Americas (2)

    

Hudson

Europe

    

Hudson

Asia Pacific

     Highland
Partners
     Corporate
     Total
  

Revenue

    $ 98,259     $ 120,250     $ 109,622     $ 15,959     $ —       $ 344,090  
    
 
 
 
 
 

Gross margin

    $ 25,597     $ 49,687     $ 38,519     $ 15,123     $ —       $ 128,926  
    
 
 
 
 
 

Adjusted EBITDA (1)

    $ 3,680     $ 1,427     $ 7,391     $ 939     $ (7,514 )   $ 5,923  

Business reorganization expenses (recoveries)

      (150 )     275       —         (214 )     —         (89 )

Merger and integration expenses (recoveries)

      139       447       (91 )     595       —         1,090  
    
 
 
 
 
 

EBITDA (1)

      3,691       705       7,482       558       (7,514 )     4,922  

Depreciation and amortization

      1,622       1,114       2,315       500       195       5,746  
    
 
 
 
 
 

Operating income (loss)

    $ 2,069     $ (409 )   $ 5,167     $ 58     $ (7,709 )   $ (824 )
    
 
 
 
 
 
(1) Non-GAAP earnings before interest, income taxes, special charges, other non-operating expense, and depreciation and amortization (“Adjusted EBITDA”) and non-GAAP earnings before interest, income taxes, other non-operating expense, and depreciation and amortization (“EBITDA”) are presented to provide additional information about the company’s operations on a basis consistent with the measures which the company uses to manage its operations and evaluate its performance. Management also uses these measurements to evaluate capital needs and working capital requirements. Adjusted EBITDA and EBITDA should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the company’s profitability or liquidity. Furthermore, adjusted EBITDA and EBITDA as presented above may not be comparable with similarly titled measures reported by other companies.
(2) See attached Hudson Americas Segment Analysis for further details.

HUDSON HIGHLAND GROUP, INC.

SEGMENT ANALYSIS

(in thousands)

(unaudited)

 

For the Year Ended

December 31, 2005

   

Hudson

Americas (2)

    

Hudson

Europe

    

Hudson

Asia Pacific

     Highland
Partners
     Corporate
     Total
  

Revenue

    $ 446,949     $ 481,623     $ 436,877     $ 62,827     $ —       $ 1,428,276  
    
 
 
 
 
 

Gross margin

    $ 114,414     $ 204,439     $ 158,345     $ 59,733     $ —       $ 536,931  
    
 
 
 
 
 

Adjusted EBITDA (1)

    $ 14,385     $ 16,164     $ 30,563     $ 4,174     $ (35,539 )   $ 29,747  

Business reorganization expenses (recoveries)

      510       (42 )     43       (278 )     —         233  

Merger and integration (recoveries)

      (35 )     —         (35 )     —         —         (70 )
    
 
 
 
 
 

EBITDA (1)

      13,910       16,206       30,555       4,452       (35,539 )     29,584  

Depreciation and amortization

      5,217       4,771       6,501       1,354       569       18,412  
    
 
 
 
 
 

Operating income (loss)

    $ 8,693     $ 11,435     $ 24,054     $ 3,098     $ (36,108 )   $ 11,172  
    
 
 
 
 
 

For the Year Ended

December 31, 2004

   

Hudson

Americas (2)

    

Hudson

Europe

    

Hudson

Asia Pacific

     Highland
Partners
     Corporate
     Total
  

Revenue

    $ 334,765     $ 447,483     $ 412,427     $ 61,679     $ —       $ 1,256,354  
    
 
 
 
 
 

Gross margin

    $ 86,662     $ 182,069     $ 143,360     $ 58,129     $ —       $ 470,220  
    
 
 
 
 
 

Adjusted EBITDA (1)

    $ 5,281     $ 969     $ 23,358     $ 2,871     $ (31,473 )   $ 1,006  

Business reorganization expenses (recoveries)

      1,051       225       (260 )     2,345       —         3,361  

Merger and integration expenses (recoveries)

      (113 )     447       (193 )     595       —         736  
    
 
 
 
 
 

EBITDA (1)

      4,343       297       23,811       (69 )     (31,473 )     (3,091 )

Depreciation and amortization

      5,307       4,773       6,163       1,805       2,060       20,108  
    
 
 
 
 
 

Operating income (loss)

    $ (964 )   $ (4,476 )   $ 17,648     $ (1,874 )   $ (33,533 )   $ (23,199 )
    
 
 
 
 
 
(1) Non-GAAP earnings before interest, income taxes, special charges, other non-operating expense, and depreciation and amortization (“Adjusted EBITDA”) and non-GAAP earnings before interest, income taxes, other non-operating expense, and depreciation and amortization (“EBITDA”) are presented to provide additional information about the company’s operations on a basis consistent with the measures which the company uses to manage its operations and evaluate its performance. Management also uses these measurements to evaluate capital needs and working capital requirements. Adjusted EBITDA and EBITDA should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the company’s profitability or liquidity. Furthermore, adjusted EBITDA and EBITDA as presented above may not be comparable with similarly titled measures reported by other companies.
(2) See attached Hudson Americas Segment Analysis for further details.

HUDSON HIGHLAND GROUP, INC.

HUDSON AMERICAS SEGMENT ANALYSIS

(in thousands)

(unaudited)

 

    

For the Three Months Ended

December 31, 2005

    

For the Three Months Ended

December 31, 2004

  
     N. America
     Development
     Total
     N. America
     Development
     Total
  

Revenue

    $ 117,062     $ 410     $ 117,472     $ 97,818     $ 441     $ 98,259  
    
 
 
 
 
 

Gross margin

    $ 29,919     $ 343     $ 30,262     $ 25,155     $ 442     $ 25,597  
    
 
 
 
 
 

Adjusted EBITDA (1)

    $ 5,044     $ (276 )   $ 4,768     $ 4,653     $ (973 )   $ 3,680  

Business reorganization (recoveries) expenses

      1       —         1       (150 )     —         (150 )

Merger and integration expenses

      —         —         —         139       —         139  
    
 
 
 
 
 

EBITDA (1)

      5,043       (276 )     4,767       4,664       (973 )     3,691  

Depreciation and amortization

      1,395       76       1,471       1,542       80       1,622  
    
 
 
 
 
 

Operating income (loss)

    $ 3,648     $ (352 )   $ 3,296     $ 3,122     $ (1,053 )   $ 2,069  
    
 
 
 
 
 
    

For the Year Ended

December 31, 2005

    

For the Year Ended

December 31, 2004

  
     N. America
     Development
     Total
     N. America
     Development
     Total
  

Revenue

    $ 444,877     $ 2,072     $ 446,949     $ 333,061     $ 1,704     $ 334,765  
    
 
 
 
 
 

Gross margin

    $ 112,889     $ 1,525     $ 114,414     $ 85,054     $ 1,608     $ 86,662  
    
 
 
 
 
 

Adjusted EBITDA (1)

    $ 18,001     $ (3,616 )   $ 14,385     $ 10,707     $ (5,426 )   $ 5,281  

Business reorganization expenses

      510       —         510       1,051       —         1,051  

Merger and integration (recoveries)

      (35 )     —         (35 )     (113 )     —         (113 )
    
 
 
 
 
 

EBITDA (1)

      17,526       (3,616 )     13,910       9,769       (5,426 )     4,343  

Depreciation and amortization

      4,908       309       5,217       5,040       267       5,307  
    
 
 
 
 
 

Operating income (loss)

    $ 12,618     $ (3,925 )   $ 8,693     $ 4,729     $ (5,693 )   $ (964 )
    
 
 
 
 
 
(1) Non-GAAP earnings before interest, income taxes, special charges, other non-operating expense, and depreciation and amortization (“Adjusted EBITDA”) and non-GAAP earnings before interest, income taxes, other non-operating expense, and depreciation and amortization (“EBITDA”) are presented to provide additional information about the company’s operations on a basis consistent with the measures which the company uses to manage its operations and evaluate its performance. Management also uses these measurements to evaluate capital needs and working capital requirements. Adjusted EBITDA and EBITDA should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the company’s profitability or liquidity. Furthermore, adjusted EBITDA and EBITDA as presented above may not be comparable with similarly titled measures reported by other companies.